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The Euro 1999 - 2012 R.I.P.
This article originally appeared in the Daily Capitalist.
Italy is the world's eighth largest economy and it has one of the highest levels of public debt-to-GDP in Europe:
Greece is ranked the 28th largest economy in the world. By comparison Ireland is ranked 36th.
Needless to say, Italy represents a flash point in the euro zone as bond vigilantes have gone after it for the past two days. Fear is contagious as they say. Greece is the ostensible problem and the stated reason for today's EU emergency meeting, but they will discuss Italy. Italy's debt costs are still relatively low, but the Bund spread is growing and their cost of debt relative to the amount of debt (primary balance) is a problem.
Is this something we here in Fortress America should worry about? Yes.
As Goes Greece, So Goes ...
Contagion is the big fear in the euro zone. If Greece defaults on its sovereign obligations that lends credibility to an unwinding of the euro because German and French taxpayers will ultimately and reluctantly foot that bill. That is because the biggest lenders to Greece are German and French banks, and like us, they would sacrifice a stance against moral hazard before they will see their banks fail (bailouts).
There is no way Greece can pay back its debt to the European Financial Stability [Bailout] Fund or its other creditors in our lifetimes. And it is unlikely that they will be able to muster the courage to significantly cut back the large public trough and liberalize their economy in order to make repayment happen. Today the EU ministers agreed to "enhance the €440 billion [bailout fund's] flexibility and scope," which really means they will allow the €440 billion fund to buy Greek bonds on the secondary markets, thereby bailing out the banks. It will take the vote of each country to allow them to do this, so it's not a fait accompli ... yet. But it is easy to visualize creditor banks lining up at the fund window, Greek bonds in hand. Also, it is likely they will restructure Greek bailout debt with longer maturities. This will amount to a default as far as the rating agencies are concerned. The markets will react negatively, and money will flow into Treasurys.
Bund spreads are high and sovereign rates on PIIGS have been climbing.
Yesterday (Tuesday)10-year yields on Greek, Portuguese, Irish, Spanish and Italian debt fell sharply which means the ECB intervened in the market to allay fears. But, they can't do that long enough to keep the vigilantes away.
Italy Isn't Greece
As the world's eighth largest economy, Italy's problems are Europe's problems, and Europe's problems are our problems. About 16% of our exports go to Europe. The more the euro zone is roiled with default problems, the more hot money will flow here and ultimately increase the dollar versus the euro. While your European vacation will be cheaper, exporters to Europe will take a hit.
What are Italy's problems? The aforementioned sovereign debt as 120% of GDP is a problem in a socialist country whose economic growth has been flat for the past 10 years--less than 0.25% vs. 1.1% for the EU. Q1 growth was 0.1% versus the euro zone's 0.8%. The government has been doing what all governments do: buying votes with social welfare benefits. If they don't have the money, the don't stop spending, they borrow and spend. Nothing new there. In fact, the Romans invented the practice going way back to the days of the Republic. The debt is mostly (75%) owned by Italian banks, and the short-term roll-over is relatively modest:
But the "modest" amount is more problematic that it would look. They will probably get through 2011, with a little help from euro zone friends, but with a declining economy and a poor economic future, rising borrowing costs could leave them little room to maneuver.
Like Greece, the rest of the EU is demanding Italy cut spending and bring their budget in line with reality. Berlusconi has proposed a €43 billion austerity package, and the opposition was quick to agree to do it with "'very few'" amendments to the budget plan in order to speed the bill's passage." I wonder what "very few" really means. His administration's hold on power is tenuous.
Reforms include increased retirement age, public-sector wage freezes, simplified tax structure, and fewer transfers of funds from the central state to local administrations. In fairness, their budget deficit "shrank to 4.6% of GDP in 2010 from 5.4% the previous year, the lowest level among euro zone countries after Germany and well below the euro zone average of 6%."
From Moody's:
Italy's deficit is targeted to fall to 3.9% of GDP this year, to 2.7% in 2012, and to 2.2% in 2013. The government expects a balanced general budget and a primary surplus of 5.2% in 2014 because of growth in savings. ...
Expected measures could reduce the public debt—the second highest in the euro zone after Greece—to 112% of GDP from around 120% in 2010 over the next four years, according to government estimates. ...
The projected decline in the public debt seems too ambitious in light of past developments. ...
The declining competitiveness of Italy’s exporters and higher labour costs might cause the economy to grow below its potential, further eroding the country's fiscal position. Before the euro zone was created, Italy improved its competitiveness through devaluation of the lira. A single currency limits Italy’s ability to adjust its exchange rates to local conditions and leads to lower economic growth and excess unemployment.
They worry that Italy's debt cost will rise, that GDP will decline, and the projected 2014 budget surplus of 3% is not likely to be achieved. That becomes very likely in light of the fact that Europe's economies are declining. Anticipated revenues will fall short of projections.
A Reuters article on the crisis hit the nail on the head:
One factor behind bond markets' growing instability is a sense that the euro zone's basic strategy for dealing with debt problems -- keeping countries afloat with emergency loans in the hope they can grow their way out of their debts within a few years -- is flawed. More radical action to cut the countries' debts or boost economic growth may be needed.
The basic problem is the euro zone itself. It was a poorly conceived program, designed for political purposes rather than economic purposes. The EU's future could be something this:
- ECB raises interest rates more than what they just did.
- Individual countries will default. Most likely Greece, Ireland, Portugal. Maybe Italy and possibly Spain.
- Rollovers and extended maturities as part of a workout would be considered to be a default by the rating agencies.
- The euro will decline. I recently suggested that the euro could fall below the dollar, but perhaps that was reaching a bit; it all depends on how things transpire, which is the problem with forecasts.
- Germany, France, and Belgium will bail out their banks. The ECB will buy their bonds thus expanding money supply (currently it is shrinking).
- Weak countries will exit the euro zone and devalue their currencies as often as needed.
A bailout of Italy would cost the EU another €500 or €600 billion. Spain would be another €300 billion. Why would Germany and France want to do that?
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I have more faith in the Euro than in the USD...
Virginia? Where CIA is planted? All clear - well established stupidity, ah-ah..
:)
The, 'Germans don't want to bail out lazy Greeks' idea is false.
What is being bailed is lazy German/French bankers. No bailouts means bank failures spiraling out of control due to 'risk management' on the part of banks ...
Selling each other default insurance in the form of credit default swaps.
Greece can default and the Germans/French bail out their banks directly. Both France and Germany can afford it provided they do so within their own corner of the euro. This would certainly provoke outrage: Merkel's government is hanging by a thread right now, a big bank bailout would be the end of her and her party. Meanwhile, Sarkozy is out and who are the contenders?
Some dudes named, 'Manny, Moe and Jack'.
If Greece defaults the other PIISs will default in short order. End of euro? There will be trillion$ in debt in 'nothing in particular' currency floating around. Who gets custody of the 'orphaned' debt will be interesting. Much of this is owed in euros to US banks. How much will banks be repaid in what??? currency?
Dollar looks strong here: the various eurodebts are like the debts of various individual US states denominated in Monopoly money. German bank debt denominated in euros priced in (sharply devalued) marks would be a target for hedge funds offering dollars.
Ironically, what has done the euro in is its infernal, designed in hardness. The EU cold simply print up 2 trillion euros tomorrow ... problem solved! Neither Germany nor France will allow a soft euro policy even if such a policy would buy some valuable time. Europe needs more than five minutes to repair the obvious eurostructure 'management' defects and install some much needed anti-car/energy conservation measures to wean themselves from their 'friends' in the Middle East and Russia.
A euro that is too hard for Greece and the rest of the peripherals is too hard for the Germans. Hard, so that guzzling Euroswine could 'fill 'er up' w/ cheap gas and diesel and drive in circles. By doing so they could prove to skeptical Americans how 'modern' they were. Now, everyone in Eurolandia is suffering so that some drove cheaply ten years ago.
Smart moves, Eurojackasses!
Done in by its own 'success' the demise of the euro leaves the dollar and 'nothing in particular' as reserve currencies. The euro was the credible currency contender/competitor to the dollar. The demise of the euro leaves a deutschemark economy dead on arrival. Germany's goods would become uncompetitively expensive particularly in the post- peak oil markets. Germany would have to do everything in its power to devalue its mark, even as its own fuel consumption (and the consumption it exports) shrinks and fuel prices skyrocket. The asset fire-sale would move to Germany from Greece. This would include Germany selling its euro- debts for pennies on the mark.
Demise of the euro is energy conservation by other, more pitiless means.
What would replace the euro as a reserve currency? Swissy is too small a float, ditto 'hard' yen. China won't float its currency, it will sell its dollars instead: a reserve issuer must run current account/trade deficits which are anathema to Beijing. Gold?
At $1,500 per ounce there is little gold on the markets. Where is the float? For any metallic currency there must be a liquid trade in he metal. Now? Everyone hoards and there is little trade due to the high price in non-gold currencies.
Silver is in the same boat, with prices 3 times 'normal' highs and silver harder and harder to come by. Any paper gold/silver currency regimes would be no different from the various (crooked) paper gold/silver scams littering the internet @ various 'finance' sites.
The euro could have been a contender but with lazy, auto- mad Europeans running the euro machine, its fate was a foregone conclusion.
@Steve
I keep banging on that the ECB should take a near 100% loss on the Irish mortgage paper it holds and monetize the loss.
This would create inflation in Ireland when mortgage holders are free but the Irish Goverment could double the tax on Personal transport and increase our trade surplus but no one listens..........
I guess the Germans want to remain mercantile merchants.
Got tired of american wet dreams.
D-Day: We have an old saying in Delta House: don't get mad, get even.
We us Europeans will get mad AND even. After all, Americans are just a sidestep in evolution :)
"Why would anyone think that a monetary system whereby poor states spend and get bailed out by rich (i.e., successful) states would ever work?"
Why, the same people who think that believes it is OK to steal money from rich people and give it to poor people... Which would be just about all of the oligarchs.
The solution is: scrap the banks and start with only deposit banks.
They lose all and the new banks will only do deposits and transfers for a small fee (whether gold/silver-based paper or simply PM). Which means a lot of rich families will be fucked and will lose their influence on political parties and large masses of people, via corporations. Tough luck.
Then return to skill-based education and labour market. People get paid in gold/silver-based currency. Those who don't find employment and are not supported by their families should get enrolled in local forces for public works, like maintenance and such. And they get in return for their work coupons/currency to buy food and secure accommodation. Old retired folks, with the exception of the ill, can work too (my grandfolks worked well into their 70s) on easier tasks. End of most of the welfare issue.
No need to run deficits anymore. Cut public sector to a modicum of public order, infrastructure security checks and so on. Decentralise most of it.
End paper economies, end financial speculation, end anything other than commodities negotiations and trade instruments. The rest of paper industries -- burn them to the ground.
End political parties systems and let communities organise themselves based on self-sustaining social networks.
Was with most of what you said till that last sentence, self-sustaining social networks? No matter the jargon or new age buzzwords this is not going to fly. You are talking about tribalism and xenophobic local communities that have no interest in accepting diversity or respecting the rights of people outside thecomfort zone of their self-sustaining social network, ie. tribe. It might be technologically sophisticated tribalism, but we all know that the only thing standing between civilized people and people who burn witches is a strong central government. Many of the alleged self-sustaining social networks (southern states) thought it was a good idea to look the other way while black males were lynched, and as long as lynching was a problem they had an excuse not to battle discrimination in housing, employment, education, they had "larger problems" to solve first, like lynching. It was the federal government only that stepped in and emancipated slaves, and later it was the same that forced the south kicking and screaming to this day to stop violating peoples rights. How many times do we have to get on the hamster wheel and try the same old shit over and over? Modern industrial high population density life means a strong central government with strong central powers, if there is a deficiency in the way it is applied then that is the problem and that is what you need to solve, but simply hearkening back to bygone eras of communities self organizing (city states? Baronies? guilds?) it cannot work, we just are not a rural agrarian globe any longer. Dream of Ecotopia all you want, nothing wrong with that, I fantasize I am young and hunky, it relieves stress, it's fun, but it is not an option in the real world and we all know it.
High public debt ratios relative to private credit is a sign of economic health.
It means less leverage in the system and more real savings if held domestically.
The opportunities for malinvestment are less.
And the peripheral states are not being bailed out by the rich - deposits are being subtracted to pay external sov debt.
Are you really an "econopihile" or an "econodunce"?
To ask "Who ever thought the Euro would work" suggests the latter.
Unask the question and substitute instead:
"Cui Bono if the Euro miraculously manifests itself; cui bono if the Euro fails; cui bono if the Euro succeeds, and finally, Cui bono if the Euro fluctuates wildly while the fate of the currency is in flux?"
Who always benefits?
George Soros immediately comes to mind and I'm certain the top few per cent who allied with him. And his kind.
Ha Ebworthen: so young and so naive, it reminds me of my own childhood.
Regards Bill, and 1975 dittos.
Bye, bye, Miss Euro Pie, took my biscuits to the levy but the levy was dry,
And goold old boys were drinking escargot and whine
Singin' this will be the day that it dies,
This will be the year the Euro dies.
"Weak countries will exit the euro zone ..."
Or maybe strong countries like Finland will get the ball rolling. A recent poll there showed sentiment moving in that direction.
I cant believe someone can write such a demented article as this one.
Fortress America? You mean the 1,5 trillion budget deficit? Eurozone combined deficit for this year and next one wont be that high. Your fortress america produces more deficit in one year than eurozone in two.
Declining european economies? How about you look properly at the charts you refering to? European economies are growing, albeit at slower pace.
So Italy which will have a 5% structural budget surplus is a problem, but US with 9% structural deficit is fortress? Yeah, right.
Now, I dont know, are you really demented or just plain stupid? It´s your brain RIP, not the euro. But on the other hand, something that dont exist cannot die....
I don't disagree about Econophile's either ignorance, naivete, or intentional propagandizing, but not because italy has an SD half ours.
You betray your own ignorance to compare a nation like the disUnited States with that of a piddly ass economy like Italy. Or any other.
There is no economy on earth like America's. Regardless of the deficit, national debt or metric you wish to compare it with.
As long as $ remains the premier fiat. And when exactly do you see that changing?
e.g. America has 14 trillion dollar debt to foreign countries. That works out to $45,000 per person. Norway has a debt equal to $500,000 per person.
What on earth is comparable about those two numbers? Nothing. Norway is arguably a far better country to live in.
Among the top 20 countries' debt, disUnited States is last in debt per capita, 'ahead of' such vaunted states as Sweden, Switzerland, and Hong Kong.
These metrics comparing countries with 6,000,000 people to one with 350,000,000 growing to 500,000,000 are meaningless.
"You betray your own ignorance..."
"There is no economy like America´s. Regardless of ....... metric you wish to compare it with."
Yeah, that´s the definiton of ignorance, I´d say. Thanks for that. Or just blind arrogance. And I think this is where the constructive discussion usually ends. I can only hope that the sand you keep your head in dont get too deep into your ear holes. It´s kinda bothersome. Sometimes ....
How about backing up your pointless rant with some relevant data, schmuck?
Got data?? Got facts or just your idiotic sound bites??
Oh, so I got it right, you are indeed blind. You want data? How about you look at my first post? I understand it´s kinda difficult to see things properly with your head deep in sand, but you could at least try.
OK, and now it´s my turn. Now, Im asking for data. Tell me, when it what the last time the US, that invincible economic giant, had a trade surplus? 3 decades ago? And tell me, what´s the number one american export item to China? Oh, the scrap steel, that complex high-tech product no one else can manufacture.
But at least you admit that the only what keeps US above water is the dollar´s reserve status. You wanna know when that ends? That´s easy. Currently, 60% of world reserves are held in dollars. 10 years ago it was 70%. So you have a full decade untill you finally realise that the king has indeed no clothes. Enjoy it, while it lasts.
Indeed there is no other economy on earth like America's: about the meaning and the "value" of this sentence we could argue a life long.
The euro bashing leveraging on the differences between european countries via rating agencies (after all, Portugal is no more broke than California or any other State or Muni of the US of A) is exactly a move to retain the $ as premier fiat in spite of all efforts put by the fed to undermine the world's confiance in it.
The time when the $ won't be the being premier fiat (or, when the US won't have full control upon it, which is the same) anymore might be closer than you think.
It's the data on comparisons that you make that i find weightless.
There you go again comparing a 36 million person STATE, a diverse, vibrant, hotbed of economic activity with a COUNTRY like Portugal that can't print it's own momey, has little if any economic diversity and is backward from Californica in practically any venue you can name. Californica can be sustained by the federal government of the United States, it can outproduce Portugal in any economic sphere you can think of, and likely has a GDP that dwarfs Portugal's, per capita. There is no comparison here that has any validity whatsoever.
Stop taking one data point and saying that it matters. It doesn't, never has and never will.
I repeat: To compare the disUnited States to any country on earth is only keeping your own head in the sand and anyone who extrapolates the past from ten years ago to predict the future is likely to also read chicken entrails for stock tips.
The bigger, the louder when it comes down: that's the only real difference.
It seems you know little about Portugal or any other EU-Country for that matter. Why do you write 36 Million STATE in caps? Is POrtugal no STATE in your eyes? Can California print his own money (Minnesota comes to mind as a more suitable parallel...) Can we compare the total GDP of the EU (meaning the euro-zone) with that of the USA? Sure we can: it's actually higher according to some sources.
The economic diversity of the EU surely is comparable with that of the USA with no need of an elefantiac defense sector to hide state subsidies. We have lots of problems the same as the US have, but you export a great deal of them via printing machine.
I think a bath in humilty would do good to everybody on either side of the pond, because while you are playing the "THIS IS SPARTA!"-game, there are lots of Countries out there waiting on the river banks for both of us floating by...
Yes, we could and I am not defending it in any way, just listing the reasons why it is the height of economic ignorance to compare any country to the U.S. that has such widely differing "other" metrics that put it in a class by itself.
Those who take one data point and then extrapolate it to telling the disUnited States how it should be performing is just plain naive.
The establishment has so much invested in the American consumer economy that to expect it to lose its premier status as the World's reserve currency is just wishful thinking and an axe to grind for america first haters. Irrational arguments to say the least.
Right now American manufacturers are experiencing several worker shortages in the skilled category because our dollar is lower than it has been in years. Exports are rising and have been for months. I expect it to remain in the lower performing currencies (but not to abdicate its status) as the jobs it could generate---an absolute necessity for theBamster and the Democrats to retain government control---will dictate the next POTUS and therefore which faction, the Protestants or the Jews, retain or regain the power behind the Treasury.
Doesn't hurt to be short the buck, but I wouldn't bet it being sent into the dustbin of history as the reserve currency. It could even rise in relation to other fiats, in spite of the increase in exports.
" The more the euro zone is roiled with default problems, the more hot money will flow here and ultimately increase the dollar versus the euro."
BS. Euro is holding at 1.40 level quite nicely, despite Yanks and Brits going at full power with their "euro is gonna crash"-trash talk and speculation games.
I couldn't avoid to note this too.
Despite rating agencies calling Portugal Junk while at the same time holding triple A for Big Brother, the Euro sure is under pressure, but one should not forget that at the very beginning of its history it traded under parity with the dollar, today it still remains above 1,4: I suppose Berniecopter running presses to meltdown more than compensates the three sisters bitching about Europe (the point of printing until the dollar would only be used to stuff dead animals for display, weren't there sone nuclear fleets still around to promote its use for exchanging goods, is conveniently bypassed by this pure propaganda article).
Reality is, the US is desperate to find who still sustains its debt burden and is now adopting the Samson strategy, trying to pull friends and foes in the abyss before themself or, if nothing goes, with himself. There is a little diefference however: the line doesn't go "either we save ourselves togheter or we die togheter" but rather "either you save me or we die togheter", got the little nouance?
2012 is going to be such a fun year. Can't wait to do the countdown :)
It'll start with gold at $2k...at least.
"Why would anyone think that a monetary system whereby poor states spend and get bailed out by rich (i.e., successful) states would ever work?"
That is at the top of the page and I have to note this, some of the US states pay in to the federal government more than they get back, while other poorer states spend and get back more than what they pay in. And for the most part it reads like a near perfect division of red states and blue states with the democratic leaning states not getting a fair share back while the lazier and lesser educated GOP leaning places getting back more than their fair share.
The most recent year for which good data is available is 2005, but here are the states that pay in more than they get back:
New Jersey heads things up getting only $0.65 on the dollar back from the feds, no wonder they are broke.
Nevada 67 cents (this is now considered a toss up state, purple, rural areas are redder than blood, urban areas are more and more blue)
Connecticut 73 cents
Minnesota 73 cents
New Hampshire 75 cents (Neither red nor blue really, more gray like granite)
Illinois 78 cents
Delaware 80 cents
California 80 cents
New York 82 cents
Colorado 83 cents
MA 85
WI 88
WA 89
OR 93
MI 94
FL 95 (This one surprised me since there is so much SS and social spending, I thought it would be far less, but with no income tax I think they might be getting a bit punished in appropriations)
And TX makes the list barely at nearly dollar for dollar with 97 cents.
All the rest get more back than they pay in, but the bluer the state the closer to even steven they are such as RI at 1.01. The ONLY southern state aside from TX to be close to parity ($1.03) is Georgia, while Mississippi got back more than twice what it's contribution to the federal government.
Nineteen states got back more than a buck and a quarter per dollar paid in, a couple of blue states and surprise states made the list, Hawaii was 1.43, but nearly all because of military spending there as well as the cost of living. One of the reddest and richest states nearly topped the list, Sarah Palins' coven state got a 1.83 but again mostly due to military and COLA but also oil purchases. Go figure, I always though the USA already owned the oil and allowed the drillers access in return for a royalty.
So, the difference between the USA and the EU at this point is that the USA is a full fledged transfer union, whereas the rich (Germans, Dutch, Finns, and to a degree French) in the EU do not want to relieve suffering in the southern and rural tiers of nations that are not as wealthy in spite of the fact that it was the interest rate policy and monetary policy favoring the richer nations that caused so much of the problems in the PIIGS.
By the way, a huge part of why red states get back so much more than they contribute is agriculture, a lot of federal money goes into ag subsidies mostly for price supports and now ethanol. Also because where there is ag there is a lot of poverty, thus there is a lot more social spending in those places, so part of why red staters bitch about welfare so much is every time they go into Winn Dixie or Publix they have to stand behind poor people using food stamps. Of course Tyson, Monsanto, ConAgra and others get even more welfare in spite of enormous profitability. And it is partly demographics, those states are thinly populated, and much of the wealth is held as land, if you are white and have land you are essentially wealthy even if your income is not huge, but if you do not hold land you are basically pretty well fucked in a red state.
The EU is either going to have to give up on monetary union in which case the poorer nations will simply not repay the banks of the richer (that is print up a bunch of lira or punts and call it even) and they will all be equally screwed, or they can devalue the Euro significantly and ride out the inflation and depression that will be required to balance the balance sheets of the nations and institutions. I think it will be the former because the latter does not do enough to share the pain, it does not make the root overspending everywhere stop, it does nothing to assure the wealthier that the poorer will not cheat by cooking the books, it is a game aof chicken between the wealthy and the poor and the wealthy are not going to blink, while the poor have no eyelids. It would require a central federal government with historic powers of law making and enforcement, like we used to have here before we handed government over to Wall Street/Golden Sacks.
I doubt the USA is going to make it past 2013 in it's current form, I see a break-up ala Soviet Russia headed our way, and maybe even a reemergence of the Confederate South if Obama is reelected, after all that is really what is bothering republican rank and file these days, a black president. I say kiss them off, they will live in a theocratic hypocritical shit hole with no industry, few ports, a major poverty problem, sure they will have cotton and peanuts, but little else, paved roads in white enclaves I suppose, just look to South Africa of say 1985, that is the GOP/red state paradise.
http://www.nemw.org/index.php/flow-of-federal-funds
The main problem with analysis of the article is in the methodology.
Formulating such an analysis based on state boundaries is not simply arbitrary, but meaningless. Logically, it makes about as much sense as basing it by federal paybacks according to astrological signs.
The equity problem is not between Alabama and Connecticut. It is not "fixed" by adjusting the overt payoffs to agribusinesses and military contractors, or having a military base here or there. It matters little where Goldman Sachs has its home base, or EXXON is headquarted. The problem is not identified geographically.
The overall flow of wealth and power is upward. The overall impoverishment and disenfranchisement is of the lower classes. The malinvestments in our crumbling domestic infrastructure and society are done at the behest of an elite few. The petrodollar ( with military backup), and the control of markets and resources (again with military backup), results in "payoffs" from outside the 50 states, again mostly benefitting an elite few individuals and corporations. Offshore accounts and money laundering add to the upward flow even more.
An interesting post up until the last paragraph, which is pretty inane.
Inane eh Hedge, well, I admit I have no crystal ball, but then I am betting you do not either and I recall a few people who predicted the collapse of the Soviet Union were also considered lunatic fringe at the time. Most thought if collapse was seen as even possible they would resort to global war first in an effort to hold the system together. The rich that own us do not really care what you call the nation or it's people, and they do not care what kind of constitution is in place as long as they can hang onto their dynastic wealth and even better collect a larger share of the national income, their loyalty is to their wealth, but they are not stupid and they know that timing in investment is a fools game. Timing is where everyone that gets burned got burned, the hubris of trying to get a few more pips before selling. Same with a nation, they know they have wrung almost all the goodies from the treasury and what is left will be available only at declining returns.
Anyway, even if you do not agree with the last paragraph maybe you can suggest an alternative?
An alternative is to flee forward: something like issuing Eurobonds based on total EU GDP, the cash flow divided by GDP contribution of every single EU State, the bonds of the screwed EU Countries traded inside EU only at governative level (i.e. comissioning of these countries).
The "Greece" problem accounts for a single digit number of total EU GDP, and Portugal and Ireland the like. Only Spain and Italy are bigger problems, but if they were to "hide" behind EU bonds, they could get financing at near German rates.
It's a question of political will, and the ties between single EU Countries are already too many to be simply broken unilaterally. If there is half a willingness to go forward with the Euro, it is far from over.
Speaking about Soviet Union parallels, I'd look closely at the debt ceiling issue if I were you... Hope Bernanke's printing presses got some maintenance in the meanwhile.
Unfortunately socialism and the welfare state ALWAYS succumb to too much
of a good thing and by definition morph into moral hazard. Most people would
rather get paid for doing nothing.
Welfare state? Socialism? For bankers you mean right? Boardroom creeps and wealthy whiners who do not pay taxes in a fair share but are happy to lend to the all of us/government at interest (bonds), corporate subsidies and all right? That was what you meant, the military/agricultural/financial complex that has made us all debt slaves.
My solution - end the fed and make banksters unemployed.
+1
The Euro success is high on the list of an American national concern. If the Euro fails then much of Europe fails and then who will emerge as a super power that can challenge the USA?
Europe can never form a coalition of states in the current form so the chaos is what the foreign policy wants!
Just keep it barely alive!
All fiat is a failed concept.
not a failed "concept" but a failed monopoly.
..all monopolies fail, they're systemic risk incarnate, their behaviour is dumber than mud and by nature both parasitical and corrupt to the core.
..only competition averts failure by having a diverse range of competing (healthy) systems. You can't 'beat' competition (free market systems) from any angle
+55.
haha, you are fucked.
Europe is a net creditor with no trade deficit. And you think the Euro is fuct......
End all fictions.
All fiat moneys are fictions.
All corporations are fictions.
All governments are fictions.
All debts denominated in fiat money are fictions.
What we need is:
FICTION --- 10,000 BC to 2012 --- RIP.
Your timeline is a little long. Start it with Akhen'aten being banished from Egypt, taking the name Moses, starting the Jewish religion, and go from there.
Moses was not a Jew. He was of the tribe of Levi, along with his brother Aaron. Jews are descendants of Judah, a separate tribe. There were twelve sons of Jacob, aka Israel, of which Levi and Judah were two. Thus Moses was an Israelite but not a Jew.
Also, Semites were the descendants of Shem, a son of Noah. All Jews and Israelites are Semites, but not all Semites are Israelites or Jews.
Lennon Hendrix --
FYI -- That was a popular theory some years ago (I dug it too) -- but historic evidence suggests against it.
(But it *is* true that Akhenaten was actually the first proponent on record for monotheism. ... Just not Judeo-Christian monotheism)
Took a long time for an emancipated civilisation to enslave itself to wages.
It would be wrong to blame history or religion(s) for your current fear(s)
Wages=Usary
How long has that beN?